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California Ups the Ante on Businesses: Many New Labor and Employment Laws

The 2017 California Legislative Session produced quite a number of new laws that will substantially impact the state’s employers. The following is a discussion of the major new labor and employment laws that took effect on January 1, 2018.

AB 168 – Prohibited Use of Prior Salary

AB 1681 (Eggman – Stockton) was signed on October 12, 2017. This bill adds Section 432.3 to the California Labor Code primarily to preclude the use of salary history information in employment situations.

First, the bill prohibits an employer from relying upon salary history information for any applicant for employment when deciding whether to offer employment or what salary to offer to that job applicant.2

Second, an employer is prohibited from seeking any salary history information, which is defined to include compensation and benefits, about any applicant for employment. This prohibition applies personally or through an agent, whether orally or in writing.3

Third, an employer must provide a job applicant with a “pay scale for a position” if the applicant makes a “reasonable request”4 for such a pay scale.5

Fourth, this Labor Code section does not apply to salary history information that is otherwise disclosable to the public pursuant to federal or state laws, such as the California Public Records Act or the federal Freedom of Information Act. As such, this provision would not apply to salary information available for public employees who are seeking a new position.6

Fifth, this Labor Code section applies to all public and private employers, and specifically includes state and local governments as well as the Legislature.7

Sixth, nothing in this new law prohibits a job applicant from “voluntarily and without prompting” disclosing his or her salary history information to any prospective employer. In such a case, an employer is not prohibited from considering or relying on that voluntarily disclosed salary history information in determining that job applicant’s salary.8

Finally, the new law reiterates existing state law found in Labor Code Section 1197.5 that prohibits prior salary, by itself, to justify any disparity in compensation.9

As new provisions of the Labor Code, they are subject to private enforcement through the Private Attorneys General Act (PAGA). PAGA allows representative actions for violations of the Labor Code. Even though the Governor vetoed an earlier version of this bill, this year he signed it in a ceremony with the Legislative Women’s Caucus despite strong objections by the California business community.

The new law applies to private and public employers; government employees often have their salary information available as a matter of the public record. AB 168 was opposed by all of the major business organizations, led by the California Chamber of Commerce.

Employers in California will need to revise their job applications and any online materials to remove any references to prior salary history. In addition, those conducting job interviews and recruiting must be properly trained in the new law.

AB 450 – Protections from Federal Immigration Agents

AB 45010 (Chiu – San Francisco) was signed on October 4, 2017 dealing with immigration worksite enforcement actions.

This bill added Government Code Section 7285.1 to prohibit an employer (or a person acting on the employer’s behalf), “except as otherwise required by federal law,” from providing “voluntary consent” to an immigration enforcement agent to enter any nonpublic areas of a place of labor. However, this prohibition does not apply if the immigration enforcement agent provides a judicial warrant.11

Any employer who violates this new section will be assessed a civil penalty of $2,000 to $5,000 for a first violation and $5,000 to $10,000 for each subsequent violation. If a court finds that an immigration enforcement agent was permitted to enter a nonpublic area of a place of labor without the employer’s consent, then this civil penalty is not assessed.12

There is also an exception if the employer (or agent) takes the immigration enforcement agent to a nonpublic area where employees are not present for verifying whether the immigration enforcement agent has a judicial warrant. But consent to search nonpublic areas cannot be given in that instance.13

The California Labor Commissioner and the California Attorney General have “exclusive authority” to enforce this new section, and they must do so through civil action. Any civil penalties recovered by them are deposited in a state fund.14 The new law specifies that his section applies to both public and private employers.15

In addition, this bill added Section 7285.2 to the Government Code to prohibit an employer (or a person acting on the employer’s behalf), “except as otherwise required by federal law,” from providing voluntary consent to an immigration enforcement agent to “access, review, or obtain the employer’s employee records without a subpoena or judicial warrant.” An employer (or agent) may challenge the validity of either document in federal court.16

However, this prohibition does not apply to “I-9 Employment Eligibility Verification forms and other documents for which a Notice of Inspection has been provided to the employer.”17

Any employer who violates this new section will be assessed a civil penalty of $2,000 to $5,000 for a first violation and $5,000 to $10,000 for each subsequent violation. If a court finds that an immigration enforcement agent was permitted to enter access, review or obtain the employee records without the employer’s consent, then this civil penalty is not assessed.18

The California Labor Commissioner and the California Attorney General have “exclusive authority” to enforce this new section, and they must do so through civil action. Any civil penalties recovered by them are deposited in a state fund.19 The new law specifies that his section applies to both public and private employers.20

This new law also added a new to the Government Code to provide that “nothing in this chapter shall be interpreted, construed or applied” to either restrict or limit an employer’s compliance with an agreement governing the use of the federal E-Verify system.21

This new law added Section 90.2 to the Labor Code to require an employer, “except as otherwise required by federal law,” to provide a notice to each current employee of any inspections of I-9 Employment Eligibility Verification forms or other employment records conducted by an immigration agency. This notice (including specified information) must be posted in the same language that the employer normally uses to communicate employment-related information to employees, and the notice must be provided without 72 hours of receiving notice of that inspection. In addition, similar written notice must be given within 72 hours to an employee’s authorized representative.22

On or before July 1, 2018, the Labor Commissioner is required to develop a template posting that employers may use to comply with this notice requirement.23 An affected employee must be provided a copy of the Notice of Inspection if a reasonable request is made of the employer.24

In addition, an employer, “except as otherwise required by federal law,” must provide a copy to each current, affected employee (and his or her authorized representative) of the written immigration agency notice that provides the results of the inspection of the forms and records. This must be done within 72 hours of its receipt. This information must include any “written notice of the obligations of the employer and the affected employee arising from the results of the inspection.” This notice must contain specified information and must be delivered by hand at the workplace, or by mail and email if that is not possible.25 An “affected employee” is defined as an employee identified by the immigrant agency inspection results to be someone who may lack work authorization or whose paperwork is identified as having deficiencies.26

Any employer who violates this new section will be assessed a civil penalty of $2,000 to $5,000 for a first violation and $5,000 to $10,000 for each subsequent violation. If the federal government “expressly and specifically directs or requests” that this notice is not provided to an employee, then this civil penalty is not assessed. Only the Labor Commissioner recovers this penalty.27

An “employee’s authorized representative” is defined as an exclusive collective bargaining representative.28 This is contained in Section 90.2(d). The new law specifies that his section applies to both public and private employers.29

Here again, “nothing in this chapter shall be interpreted, construed or applied” to either restrict or limit an employer’s compliance with an agreement governing the use of the federal E-Verify system.30

This new law added Section 1019.2 to the Labor Code to prohibit either a public or a private employer, “except as otherwise required by federal law,” from reverifying the employment eligibility of a current employee at a time or in a manner not required by federal law.31

Any employer who violates this new section will be assessed a civil penalty up to $10,000. Only the Labor Commissioner recovers this penalty.32 Here again, “nothing in this chapter shall be interpreted, construed or applied” to either restrict or limit an employer’s compliance with an agreement governing the use of the federal E-Verify system.33

As one might expect, this bill created a fair amount of debate during the just-concluded Legislative Session. Most of the business community went neutral in the end after the author took numerous amendments to deal with employer concerns. This bill was a high priority for its sponsor, the Service Employees International Union.

Employers in California will need to inform and train their personnel to deal with immigration enforcement agents, such as to request warrants and respond to ICE agents who seek access to either employee records or the workplace. Employers will also need to take precautionary actions in order to comply with the new law’s provisions and to prevent being assessed substantial monetary penalties.

AB 1008 – Prohibited Use of Criminal History

AB 100834 (McCarty – Sacramento) was signed on October 14, 2017 to address employment discrimination based upon criminal conviction history. The bill takes effect on January 1, 2018. Section One of the bill contains numerous findings and declarations of the Legislature.

Among other provisions, it notes that 29 states and over 150 cities and counties have adopted “ban the box” laws and 9 states and 15 cities have adopted fair chance hiring laws that apply to both public and private employers. The bill also recites that roughly 7 million California residents have an arrest or conviction.35

This new law adds Section 12952 to the Government Code to provide that it is “an unlawful employment practice” for an employer with 5 or more employees to:

Include on any employment application any question that seeks the disclosure of an applicant’s conviction history, prior to the employer making a conditional offer of employment to the job applicant;

Inquire into or consider the conviction history of the job applicant until after the employer has made a conditional offer of employment;

Consider, distribute or disseminate information about any specified results while conducting a conviction history background check; and

Interfere with, restrain or deny the exercise of any right under this new code section.36

This new law also requires an employer, when intending to deny a job applicant a position solely or in part because of that applicant’s conviction history, to make “an individualized assessment” of whether the job applicant’s conviction history has a “direct and adverse relationship with the specific duties of the job that justify denying the applicant the position.”37

In making this particularized assessment, which the employer may commit to writing (although not required to do so), the employer must consider the following factors:

The nature and gravity of the offense or conduct;

The time that has passed since the offense or conduct and completion of the sentence; and

The nature of the job held or sought.38

In addition, this new law provides that, if an employer makes a preliminary decision that the job applicant’s conviction history disqualifies the applicant from employment, then the employer must notify the job applicant of this preliminary decision in writing. That written notification may justify or explain the employer’s reasoning. The notification must contain specified information.39

Thereafter, the job applicant must be provided at least 5 business days to respond to the written notice provided by the employer before a final decision is made. If the job applicant notifies the employer in writing that he or she disputes the report and that he or she is obtaining evidence to support the dispute, then the job applicant must be given another 5 business days to respond to the notice.40

Thereafter, the employer must consider information submitted by the job applicant before making a final employment decision.41 If the employer makes a final decision to deny a job applicant solely or in part because of the job applicant’s conviction history, then the employer must notify the job applicant in writing of his or her specified rights.42

Nonetheless, this new section does not apply in the following circumstances:

To a position for which a state or local agency is otherwise required by law to conduct a conviction history background check;

To a position with a criminal justice agency;

To a position as a Farm Labor Contractor; or

To a position where an employer or agent is required by any state, federal or local law to conduct criminal background checks for employment purposes or to restrict employment based upon criminal history.43

Finally, this bill repealed Labor Code Section 432.9 which has been the current law prohibiting a state or local agency from asking an applicant for employment to disclose information concerning the conviction history of the applicant, until that agency has determined the applicant meets the minimum employment qualifications. This section of the law was in effect since July 1, 2014.

The goal of this new law is to help formerly incarcerated persons obtain employment, and the author and proponents have cited statistics that those with conviction records generally have lower rates of turnover and higher rates of promotion. This bill was initially opposed by the California business community, but eventually, they removed their opposition due to several requested amendments that the author made to his bill during the past Session.

As a result of this bill, job applications and means of recruiting must eliminate criminal conviction history during the pre-offer screening. Employees who recruit or interview job candidates need to be trained in the parameters of the new law. It will also be important to conduct criminal background checks post-offer, document the individualized assessment process, and ensure compliance with the response requirements when job offers are withdrawn.

AB 1701 – Liability for Subcontractors

AB 170144 (Thurmond – Richmond) was signed on October 14, 2017, to address labor wage liabilities owed by subcontractors. The bill added Section 218.7 to the Labor Code. By adding a new section to the state’s Labor Code, the provisions are enforceable under the California Private Attorneys General Act (PAGA).

The new law applies to contracts entered into on or after January 1, 2018. It specifies a direct contractor making or taking a contract in California for erecting, constructing, altering, or repairing a building, structure or other private work must assume, and is liable for, any debt owed to a wage claimant or third party on the claimant’s behalf that has been incurred by a subcontractor at any tier thereunder. It also applies to the direct contractor for the wage claimant’s performance of labor included in the contract.45

The direct contractor’s liability extends only to any unpaid wage, fringe or other benefit payment or contribution, including interest owed. However, it does not extend to penalties or liquidated damages.46

A direct contractor or any other person is prohibited from evading or committing any act that negates the requirements of this Labor Code section. However, the law does not prohibit a director contractor or a subcontractor from establishing by contract or enforcing other lawful remedies against a contractor if it hires for liability created by the nonpayment of wages or other benefits, or any contributions by any subcontractors.47

Under this law, the Labor Commissioner may enforce against a direct contractor the liability for unpaid wages through an administrative process or through a civil action. In such cases, the direct contractor’s liability is limited to unpaid wages, including any interest owed.48

In addition, a third party owed fringe or other benefits on a wage claimant’s behalf may bring a civil action against a direct contractor to enforce the liability created by the law. In such a case, the court must award a prevailing plaintiff its reasonable attorney’s fees and costs, which includes expert witness fees.49

A joint labor-management cooperation committee established under federal law may also bring an action in any court of competent jurisdiction against a direct contractor or subcontractor for unpaid wages owed to a wage claimant by the direct contractor or subcontractor for the performance of private work, including unpaid wages owed. If this committee prevails, the court must award reasonable attorney’s fees and costs. However, prior to the commencement of an action, the committee must provide at least 30 days’ notice by first class mail.50

No other party may bring an action against a direct contractor for unpaid wages.51 Property of the direct contractor may be attached after trial for the payment of any judgment received under this section.52

Actions brought under this new code section must be filed within one year of the earliest of:

Recordation of the notice of completion of the direct contract;

Recordation of a notice of cessation of the work covered by the direct contract; or,

Actual completion of the work covered by the direct contract.53

Note that this section does not apply to work performed by an employee of the state, a special district, a city, a county, a city and county, or any political subdivision.54

Upon request made by a direct contractor to a subcontractor, the subcontractor and any lower-tier subcontractors must provide payroll records which must contain the requirements specified in the Labor Code.55 The payroll records must be for those employees who are providing labor on a private work and must contain the last four digits of the social security number of the employees. The payroll records must also show fringe or other benefit payments to a third party on the employee’s behalf.56

In addition, upon request made by a direct contractor to a subcontractor, the subcontractor and any other lower tier subcontractors must provide the direct contractor award information that includes the project name, name and address of the subcontractor, anticipated work hours, and other specified information. 57

A subcontractor’s failure to comply with these sections do not relieve the direct contractor from any of the obligations contained in this law.58

The new law specifies that the obligations and remedies provided in this section are in addition to anything else provided by law, except that nothing in this law is to be construed to impose liability on a direct contractor for anything other than unpaid wages and fringe or other benefits.59

In addition, nothing in this section alters the owner’s obligation to timely pay a direct contractor or a direct contractor’s obligation to timely pay a subcontractor, except that the direct contractor may withhold as “disputed” all sums owed if a subcontractor does not timely provide the information until that info is provided.60

This new law represents a novel approach to the concept of “joint employment.” The Governor included a signing message with AB 1701:

I am signing Assembly Bill 1701. This bill would extend liability to a general contractor for wages owed to workers of a subcontractor and create new wage collection remedies for private non-public work projects.

The author and sponsors of this bill have committed to proposing legislation next year to resolve a dispute over the meaning of section 218.7 subdivision (h) in the Labor Code by striking that subdivision. I look forward to receiving that legislation early next year to avoid any ongoing disputes about the meaning of that provision when this measure takes effect on January 1, 2018.

Contractors in this state that are working on a private construction project will now be liable for wage and fringe benefit liabilities that are incurred by subcontractors at any tier of the project. While California law has generally provided joint liability, it applies to public works projects. This new law extends similar liability to private projects.

SB 63 – New Parental Leave

SB 6361 (Jackson – Santa Barbara) was signed on October 12, 2017 to create a new unlawful employment practice related to parental leave. Specifically, the bill creates a new leave mandate on businesses with 20 – 49 employees. An initial section of the bill names it the “New Parent Leave Act.”62

The bill adds a new section to the Government Code63 to create an unlawful employment practice for failure to provide a minimum of 12 weeks of parental leave or failure to maintain health plan coverage during the time of parental leave.64 By amending the Fair Employment and Housing Act (FEHA), the bill allows considerable private enforcement of the new mandated leave policy, including the threat of injunctive relief, punitive damages, and attorney’s fees.

The new law prohibits an employer from refusing to allow an employee to take up to 12 weeks of parental leave to bond with a new child within one year of the child’s birth, adoption or foster care placement. An employee is defined to have more than 12 months of service with the employer and at least 1,250 hours of service with the employer during the previous 12 months, and who works for an employer with at least 20 employees located within 75 miles.65

In addition, the new law prohibits an employer from refusing to maintain and pay for coverage for an eligible employee who takes parental leave under a group health plan for the duration of that leave, not exceeding 12 weeks over a 12-month period.66

An employee can take other leave provided by existing state law if the employee is otherwise qualified for that leave.67 However, this new leave mandate does not apply to an employee who is subject to both the leave provided to those employees who work for an employer with at least 50 employees and who are subject to the federal Family and Medical Leave Act.68

An employer may recover the premium that the employer pays for maintaining coverage if the employee fails to return from leave after the period of leave has expired and the failure of the employee to return to work is for a reason other than the continuation, recurrence, or onset of a serious health condition or other circumstances beyond the employee’s control.69

Where both parents are entitled to leave under this new mandate and they are both employed by the same employer, then the employer is not required to grant leave that would allow the parents leave totaling more than 12 weeks. In addition, the employer may grant simultaneous leave to both employees.70

The new law also makes it an unlawful employment practice for an employer to refuse to hire a job applicant or to terminate or discriminate against an individual because the individual exercised his or her right to parental leave or because an individual gave information or testimony as to his or her parental leave (or even to another person’s leave) in an inquiry or proceeding.71

It is also an unlawful employment practice for an employer to interfere with, restrain or deny the exercise of any rights under this new code section.72 By making these violations an unlawful employment practice, they are subject to enforcement under FEHA.

The new law defines “employer” to mean a person who directly employs 20 or more persons to perform services for a wage, as well as the state, cities and counties.73 The Fair Employment and Housing Council is directed to incorporate existing regulations interpreting the California Family Rights Act to govern the leave under this new code section.74

Finally, the new law creates a 2-year mediation pilot program within the Department of Fair Employment and Housing, so long as necessary funding is appropriated by the Legislature. Under this temporary program, an employer may request mediation within 60 days of getting a right-to-sue notice. However, an employee can elect not to participate in or withdraw from the mediation.75

Governor Brown vetoed a similar bill last year (SB 654) citing the cost burdens of a mandated parental leave program on small businesses. He also expressed a desire for mediation to address the litigation concerns expressed by the bill’s opponents. Interestingly, last year’s bill contained a 6-week mandated leave, whereas this year’s version contains a 12-week leave.

While the mediation program in this bill has a significant loophole, it was enough to satisfy the Governor’s concerns from last year’s bill. SB 63 was signed in a ceremony with the Legislative Women’s Caucus despite strong objections by the California business community. The California Chamber of Commerce had labeled SB 63 as a Job Killer bill.

SB 306 – Employee Retaliation Protections

SB 30676 (Hertzberg – Van Nuys) was signed on October 3, 2017, which takes effect on January 1, 2018. This bill amended an existing Labor Code section and added three new code sections to address employee retaliation actions.

Existing law prohibits a person from being discharged, discriminated against, or retaliated against for having engaged in certain protected conduct. This law applies to existing employees as well as those applicants for employment. These individuals can file a complaint with the Division of Labor Standards Enforcement (DLSE), which is also known as the Labor Commissioner. When a complaint is filed, then the Labor Commissioner may investigate.

If successful, an employee or applicant for employment is entitled to reinstatement or employment and reimbursement for lost wages and work benefits. This bill makes several significant changes to the law that tilt the “scales of justice” in the favor of employees.

First, the DLSE is now authorized to commence an investigation of an employer with or without a complaint having been filed if the DLSE suspects retaliation or discrimination during its wage claim or other investigation (including field inspections and suspected immigration-related threats) that the Labor Commissioner is conducting.77

Second, upon a finding of reasonable cause, the commissioner is authorized to petition a superior court for injunctive relief on a temporary or preliminary basis. This is a new standard, which is much lower than prior law and benefits employees. Under prior law, this could not occur until after an investigation was completed and a determination was made of the employer’s liability. And, prior law required a showing of irreparable harm and likelihood of success on the merits.

Under SB 306, a court would be required to order appropriate injunctive relief based on a belief that a violation has occurred. The court must do so if it determines that relief to be “just and proper.”78

This same section of law now also requires the court to “consider the chilling effect on other employees asserting their rights under those laws in determining if temporary injunctive relief is just and proper.” In a minor benefit to the employer community, the bill provides that injunctive relief under this new provision would not prohibit an employer from disciplining or terminating an employee for conduct that is unrelated to the claim of retaliation.

Third, the Labor Commissioner is now authorized to issue citations directing specific relief to those determined to be responsible for violating the law. Under prior law, the Labor Commissioner pursued enforcement via a civil action.79 The Labor Commissioner is also entitled to reasonable attorney’s fees if it is a prevailing party in an enforcement action.

In addition, there are review procedures, such as for requesting a hearing before a hearing officer for petitions for writ of mandate. Under prior law, employers could challenge a Labor Commissioner action in trial de novo court actions. Pursuant to SB 306, the employer challenge occurs with a writ of mandate and the posting of a bond.

Employers who willfully fail to comply with Labor Commissioner orders can be subject to civil penalties made payable to the employee. This penalty is $100 per day for each day of noncompliance by the employer, up to a maximum of $20,000.80

Fourth, employees are authorized to seek injunctive relief from a court in addition to their civil action. If such injunctive relief is granted, it is not stayed pending appeal. These new powers are intended to protect employees from retaliatory conduct by employers. With a lower standard to obtain injunctive relief, the employer community will have to watch the actions of the Labor Commissioner to determine whether the new powers are used in appropriate instances.

This bill represents a major win for organized labor in this state. The California business community offered many amendments, but most of them were rejected. Their concern is that employees may be reinstated immediately, even if it takes 2-3 to investigate and make a final determination of a business’ liability.

SB 396 – Sexual Harassment Training

SB 39681 (Lara – Los Angeles) was signed on October 15, 2017 as to address employment issues regarding gender identity, gender expression, and sexual orientation. This bill amends sections of the Government Code and Unemployment Insurance Code.

This new law amended Section 12950 of the Government Code, which requires every employer to ensure a workplace free of sexual harassment by implementing certain minimum requirements. This bill added a new requirement for all employers to post a poster developed by the DFEH regarding transgender rights in a prominent and accessible location in the workplace.82

This bill also amended Government Code Section 12950.1 by adding a new subdivision to require specified training. Now an employer must also provide training inclusive of harassment based on gender identity, gender expression and sexual orientation as a component of the training and education already required. The training must include practical examples and be presented by trainers with knowledge and expertise in these areas.83

Under current law, employers with 50 or more employees must provide at least 2 hours of classroom or interactive training and education regarding sexual harassment of all supervisory employees in California. This training must occur at least once every two years and must include information and practical guidance regarding federal and state laws, along with practical examples presented by educated and knowledgeable trainers.

In addition, this bill amends Section 14005 of the Unemployment Insurance Code to add transgender and gender nonconforming individuals to the list of “individuals with employment barriers.” These individuals have a characteristic that substantially limits their ability to obtain employment due to specified factors.84

Finally, this bill amended Section 14012 of the Unemployment Insurance Code to address an advisory board to the Governor to assist in the development of the State Plan and to carry out specified functions. Representatives of this advisory board may include community-based organizations, including those that serve transgender and gender nonconforming individuals pursuant to this change in the law.85

1. Chapter 688.

2. Section 432.3(a).

3. Section 432.3(b).

4. Of course, this begs the question of what constitutes a “reasonable request”?

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